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Mercedes-Benz Takes Over Smart Sales from Penske

The car biz has its own logic. Praised up and down for his business acumen, Roger Penske took over Smart sales in the U.S. in 2008—and has sold maybe 45,000 cars since then. In all of last year, buyers drove home fewer than 6,000 Smarts. Last month (January), Benz sold 17,273 cars in the U.S.

I think this blog did more promotion for the brand than either Mercedes or Penske did: We wrote at least three stories about the car because, despite its problems, we saw its potential, particularly as an EV city car.

Right now, the only logic for Mercedes taking Smart back into the fold is to improve the company’s corporate fuel economy standards in the U.S. (The fortwo is rated at 41 mpg highway.) “More than 1.2 million Smart fortwos have been sold worldwide since 1998,” says the press release. But the far larger share of these sales came in 2008-2009.

So the car has become a loser—for two big reasons, I think.

One: Transmission and other problems have plagued the Smart for some time. The car needs a basic rework, mechanically, and it is too expensive. There had been talk of a five-door, which we mentioned here, to be built with Nissan, and that is now cancelled. The company desperately needs to develop new product to get a foothold in the U.S., and that means something more than a cute, balky, overpriced city car.

Two: Some have said the fortwo reflected a total misjudgment of the American market. Well, if you accept the fact that the American car market is ever more segmented, then what has happened with Smart is as much a failure of marketing as it is of product.

The fortwo should have been promoted strictly as a city car. The EV version was developed too late, and it, too, is overpriced (lease-only at $599 per month), with a 60-mile range and 62-mph top speed. As PluginCars.com said, this is one tough sell when compared to the Leaf or even the Volt.

The rationale for a separate marketing and sales organization (Penske) never made much sense. So the car was an orphan. It will fit better with Mercedes-Benz-USA, but only with redesigned product and only with a strong campaign to make it appeal as a baby Mercedes.